Developing a world-class rare earth deposit in South Africa
Developing a world-class rare earth deposit in South Africa
Developing a world-class rare earth deposit in South Africa
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DRAFT<br />
<strong>Develop<strong>in</strong>g</strong> a <strong>world</strong>-<strong>class</strong> <strong>rare</strong> <strong>earth</strong> <strong>deposit</strong> <strong>in</strong> <strong>South</strong> <strong>Africa</strong><br />
March 2011
Safe Harbour Statement<br />
Forward-look<strong>in</strong>g <strong>in</strong>formation<br />
Certa<strong>in</strong> statements conta<strong>in</strong>ed <strong>in</strong> or <strong>in</strong>corporated by reference <strong>in</strong>to this presentation constitute<br />
“forward-look<strong>in</strong>g statements”. Officers and representatives of Frontier Rare Earths Limited (the<br />
“Company”) may, <strong>in</strong> their remarks or <strong>in</strong> response to questions regard<strong>in</strong>g this presentation, make<br />
certa<strong>in</strong> statements which are “forward-look<strong>in</strong>g statements” and are prospective. Forwardlook<strong>in</strong>g<br />
statements are neither promises nor guarantees, but are subject to risks, uncerta<strong>in</strong>ties<br />
and assumptions that may cause the actual results, performance or achievements of the<br />
Company, or developments <strong>in</strong> the Company‟s bus<strong>in</strong>ess or its <strong>in</strong>dustry, to differ materially from<br />
the anticipated results, performance, achievements or developments expressed or implied by<br />
such forward-look<strong>in</strong>g statements. Forward-look<strong>in</strong>g statements are based on management‟s<br />
beliefs and op<strong>in</strong>ions at the time the statements are made or presented, and undue reliance<br />
should not be placed on any of these forward-look<strong>in</strong>g statements. There should be no<br />
expectation that these forward-look<strong>in</strong>g statements will be updated or supplemented as a result<br />
of chang<strong>in</strong>g circumstances or otherwise, and the Company does not <strong>in</strong>tend, and does not<br />
assume any obligation, to update these forward-look<strong>in</strong>g statements.<br />
1 │
Topics<br />
1 Frontier Overview<br />
2 The Zandkopsdrift Project<br />
3 Operational Update and Plans<br />
4 Benchmark<strong>in</strong>g Rare Earth Projects<br />
5 IPO Summary<br />
March 2011<br />
2 │
Company Background and Overview<br />
Frontier established <strong>in</strong> 2002<br />
Management active <strong>in</strong> <strong>South</strong> <strong>Africa</strong>n m<strong>in</strong><strong>in</strong>g sector s<strong>in</strong>ce 1994<br />
Exclusively focused on <strong>rare</strong> <strong>earth</strong> elements <strong>in</strong> <strong>South</strong>ern <strong>Africa</strong><br />
Listed on the Toronto Stock Exchange <strong>in</strong> November 2010 (TSX:FRO)<br />
Market Capitalisation $265m;well funded (cash c.$54m,no debt)<br />
Zandkopsdrift (“ZC1”) is Frontier's flagship project<br />
Project identified by Frontier <strong>in</strong> 2005 and prospect<strong>in</strong>g right secured <strong>in</strong> 2006<br />
95% economic <strong>in</strong>terest held by Frontier<br />
World-<strong>class</strong> <strong>deposit</strong> measured by size, grade, <strong>rare</strong> <strong>earth</strong> distribution, and geological sett<strong>in</strong>g<br />
Good scope for <strong>in</strong>creas<strong>in</strong>g resource as rema<strong>in</strong>s „open‟ both laterally and at depth<br />
Potential for rapid development<br />
3 │
Recent Rare Earth Market Developments<br />
Ch<strong>in</strong>ese policy changes cont<strong>in</strong>ue to dom<strong>in</strong>ate the landscape<br />
Government controlled <strong>rare</strong> <strong>earth</strong> pric<strong>in</strong>g mechanism <strong>in</strong>troduced and <strong>in</strong>dustry consolidation<br />
be<strong>in</strong>g pursued<br />
Clampdown on illegal m<strong>in</strong><strong>in</strong>g (estimated 280 illegal m<strong>in</strong>es closed) and stricter<br />
environmental controls now <strong>in</strong> force<br />
Further significant reductions <strong>in</strong> export quotas announced 28 December 2010 (-35% H1<br />
2011 vs. H1 2010). Changes to quota system anticipated <strong>in</strong>troduc<strong>in</strong>g quotas by element<br />
Significant <strong>in</strong>crease <strong>in</strong> REO prices <strong>in</strong> last 6 months, with cont<strong>in</strong>ued price growth forecast<br />
US government seek<strong>in</strong>g to re-establish domestic REE supply cha<strong>in</strong><br />
High level discussions cont<strong>in</strong>u<strong>in</strong>g between Western governments and Ch<strong>in</strong>a regard<strong>in</strong>g<br />
security of <strong>rare</strong> <strong>earth</strong> supply<br />
Ch<strong>in</strong>a confirms only 15-20 years reserves of Heavy and Medium REOs (Q4 2010)<br />
Plans by countries <strong>in</strong>clud<strong>in</strong>g Ch<strong>in</strong>a, Japan, <strong>South</strong> Korea announced and more recently<br />
US and EU, to stockpile <strong>rare</strong> <strong>earth</strong>s widely reported<br />
4 │
Zandkopsdrift Project Background<br />
One of the largest carbonatite complexes <strong>in</strong> the <strong>world</strong><br />
Complex is ~ 5km across<br />
ZC1 carbonatite is 120 ha (approx. 1.2 km diameter)<br />
M<strong>in</strong>eralization similar to Lynas‟ Mount Weld <strong>deposit</strong><br />
Close to <strong>in</strong>frastructure<br />
Power, water and roads<br />
44 km by road to rail head; 230 km by rail to Saldanha Bay deep water port<br />
M<strong>in</strong><strong>in</strong>g-friendly region<br />
Over 150 years of m<strong>in</strong><strong>in</strong>g history <strong>in</strong> the area<br />
Base metals, m<strong>in</strong>eral sands, iron ore and diamonds currently be<strong>in</strong>g m<strong>in</strong>ed/processed <strong>in</strong> the<br />
area<br />
Black Empowerment<br />
74% owned by Frontier<br />
26% owned by BEE shareholders, carried to BFS but must pay 21% at that time<br />
Frontier currently has an effective 95% economic <strong>in</strong>terest at present<br />
5 │
Project Location<br />
6 │
Zandkopsdrift Project Area<br />
Gravel road to N7<br />
Zandkopsdrift<br />
carbonatite<br />
complex<br />
N7 tarred road<br />
to Cape Town<br />
Exxaro Resources<br />
Namakwa Sands M<strong>in</strong>e<br />
(~45 km)<br />
Bitterfonte<strong>in</strong> rail head<br />
(~44 km by road)<br />
7 │
ZC1 Carbonatite<br />
8 │
Zandkopsdrift Overview<br />
World-<strong>class</strong> <strong>deposit</strong><br />
Extensive evaluation carried out by Frontier and previously Anglo American<br />
NI 43-101 compliant resource (56% <strong>in</strong> the <strong>in</strong>dicated resource category)<br />
High grade zones identified (ZC1-‟B‟ and ZC1-‟C‟) which rank <strong>in</strong> top three <strong>deposit</strong>s outside<br />
Ch<strong>in</strong>a <strong>in</strong> terms of Neodymium-equivalent grade *<br />
Easy to develop<br />
Close to power, water, transport (road, rail & port) and m<strong>in</strong><strong>in</strong>g support <strong>in</strong>frastructure<br />
Shallow, large tonnage open pit potential<br />
Low cost environment<br />
Significant capital and operat<strong>in</strong>g cost advantages expected compared to most North<br />
American projects be<strong>in</strong>g developed<br />
Potential for rapid development<br />
M<strong>in</strong><strong>in</strong>g friendly jurisdiction should allow rapid permitt<strong>in</strong>g<br />
Good regional <strong>in</strong>frastructure will facilitate development<br />
Objective to be one of the early new producers after Lynas and Molycorp<br />
*Note: Equivalent grade is a measure that allows comparisons to be made between <strong>deposit</strong>s that conta<strong>in</strong> different distributions of m<strong>in</strong>erals<br />
that have different values.The Ontario Securities Commission has recommended this metric for compar<strong>in</strong>g <strong>rare</strong> <strong>earth</strong> projects. See page 30<br />
9 │
Evaluation Work on ZC1 to date<br />
Anglo American<br />
3,400 metres drilled over 54 holes<br />
2,100 samples assayed<br />
Orig<strong>in</strong>al samples (core and pulps) acquired by Frontier and re-assayed<br />
Frontier<br />
More than 1,000 metres drilled over 13 holes.<br />
3,420 samples assayed<br />
Metallurgical test work by Anglo American and Johnson Matthey<br />
Independent review carried out by SGS M<strong>in</strong>erals Services for Frontier<br />
Independent technical report and NI 43-101 compliant resource estimate prepared by<br />
The MSA Group (October 2010)<br />
10 │
ZC1 Resource Estimate<br />
56% of the conta<strong>in</strong>ed TREO ZC1 resource is at the Indicated level<br />
The <strong>deposit</strong> conta<strong>in</strong>s higher grade zones which could be exploited as discrete units<br />
ZC1 is „open‟ laterally and at depth giv<strong>in</strong>g scope for upgrad<strong>in</strong>g the estimated resource<br />
Cut-off grade<br />
(% TREO)<br />
Tonnes (Mt)<br />
Average Grade<br />
(% TREO)<br />
Conta<strong>in</strong>ed TREO<br />
(kt)<br />
Indicated Resource 1% 22.9 2.32% 532<br />
Inferred Resource 1% 20.8 1.99% 415<br />
Notes:<br />
1. Relative distribution of <strong>in</strong>dividual REOs <strong>in</strong> ZC1 is shown <strong>in</strong> the Appendix<br />
2. Resource is NI 43-101 compliant and presented <strong>in</strong> accordance with CIM def<strong>in</strong>itions<br />
3. The m<strong>in</strong>eral resource <strong>class</strong>ifications that have been applied are <strong>in</strong> accordance with CIM Def<strong>in</strong>ition Standards. The m<strong>in</strong>eral resource estimates reflect 100% of the estimated resources at<br />
Zandkopsdrift. Frontier‟s 74% owned subsidiary, Sedex, has complied with the BEE equity ownership requirements as laid down by the M<strong>in</strong><strong>in</strong>g Charter and MPRDA, through shareholder<br />
agreements with historically disadvantaged <strong>South</strong> <strong>Africa</strong>n <strong>in</strong>dividuals and entities that together hold the rema<strong>in</strong><strong>in</strong>g 26% of the issued share capital of Sedex. In addition to Frontier‟s direct<br />
<strong>in</strong>terest <strong>in</strong> the Zandkopsdrift Project through its 74% sharehold<strong>in</strong>g <strong>in</strong> Sedex, Frontier shall also be entitled to, <strong>in</strong> consideration for Frontier‟s fund<strong>in</strong>g of the BEE Shareholders‟ share of<br />
Sedex‟s expenditure on the Zandkopsdrift Project up to bankable feasibility stage, a payment from certa<strong>in</strong> of the BEE Shareholders follow<strong>in</strong>g the completion of the bankable feasibility<br />
study equal to 21% of the then valuation of the Zandkopsdrift Project. This gives Frontier an effective 95% <strong>in</strong>terest <strong>in</strong> the Zandkopsdrift Project until such payment has been received.<br />
11 │
ZC1 Total Resource – Indicated @ 2.32% TREO<br />
12 │
ZC1 Resource Estimate – Higher grade zones<br />
ZC1 – A Zone<br />
Cut-off grade<br />
(% TREO)<br />
Tonnes (Mt)<br />
Average Grade<br />
(% TREO)<br />
Conta<strong>in</strong>ed TREO<br />
(kt TREO)<br />
Indicated Resource 1.5% 16.6 2.74% 453<br />
Inferred Resource 1.5% 12.9 2.48% 319<br />
ZC1 – B Zone (conta<strong>in</strong>ed with<strong>in</strong> ZC1-A) likely sufficient for 10-15 years output at planned production rates<br />
Cut-off grade<br />
(% TREO)<br />
Tonnes (Mt)<br />
Average Grade<br />
(% TREO)<br />
Conta<strong>in</strong>ed TREO<br />
(kt TREO)<br />
Indicated Resource 2.5% 7.8 3.67% 287<br />
Inferred Resource 2.5% 4.5 3.61% 163<br />
ZC1 – C Zone (conta<strong>in</strong>ed with<strong>in</strong> ZC1-B)<br />
Cut-off grade<br />
(% TREO)<br />
Tonnes (Mt)<br />
Average Grade<br />
(% TREO)<br />
Conta<strong>in</strong>ed TREO<br />
(kt TREO)<br />
Indicated Resource 3.5% 3.2 4.57% 148<br />
Inferred Resource 3.5% 1.5 4.72% 73<br />
Notes:<br />
1. Relative distribution of <strong>in</strong>dividual REOs <strong>in</strong> ZC1 is shown <strong>in</strong> the Appendix<br />
2. Resource is NI 43-101 compliant and presented <strong>in</strong> accordance with CIM def<strong>in</strong>itions<br />
13 │
ZC1-A Zone – Indicated @ 2.74% TREO<br />
14 │
ZC1-B Zone – Indicated @ 3.67% TREO<br />
15 │
ZC1-C Zone – Indicated @ 4.72% TREO<br />
16 │
Section across ZC1<br />
17 │
Exploration and Resource Upgrade Potential<br />
ZC1 rema<strong>in</strong>s 'open'<br />
laterally and at depth<br />
Good potential to<br />
expand the resource<br />
particularly to the SE<br />
and SW of ZC1<br />
Churchite (HREE-rich)<br />
also present at ZC1<br />
30 <strong>in</strong>trusives/plugs<br />
already discovered<br />
around ZC1, a number<br />
of which are proven to<br />
be RE bear<strong>in</strong>g<br />
Other RE occurrences<br />
identified <strong>in</strong> the region<br />
and new 75,000<br />
hectare prospect<strong>in</strong>g<br />
right application<br />
submitted<br />
ZC2<br />
ZC1<br />
18 │
Historic Resource and Validation Drill<strong>in</strong>g<br />
19 │
Resource Expansion Potential<br />
20 │
Operational Update<br />
►2011 drill programme<br />
commenced at ZC1 <strong>in</strong><br />
January<br />
►Metallurgical samples<br />
for process<strong>in</strong>g to be<br />
shipped to SGS M<strong>in</strong>erals<br />
Services <strong>in</strong> March<br />
►Up to 20,000 meters of<br />
RC and core drill<strong>in</strong>g<br />
planned over the next 6<br />
months to focus on:<br />
►Metallurgical sampl<strong>in</strong>g<br />
►Geological controls<br />
►Stratigraphic analysis<br />
►Infill<br />
►Step out / close out<br />
►Satellite pipes /<br />
<strong>in</strong>trusives<br />
21 │
Metallurgical Sample Sites<br />
Drill sites for met.samples<br />
Hole ZKR<br />
36<br />
22 │
Core Drill<strong>in</strong>g at Zandkopsdrift (January 2011)<br />
23 │
Project Development Plans – 2011/2012<br />
Convert full ZC1-A Zone resource to Indicated/Measured Resource<br />
Infill drill<strong>in</strong>g at 40m spac<strong>in</strong>g<br />
Identify additional resources<br />
Stratigraphic drill<strong>in</strong>g to <strong>in</strong>vestigate potential extension of ZC1 resource to SE and SW<br />
Sampl<strong>in</strong>g, evaluation and prelim<strong>in</strong>ary drill test<strong>in</strong>g of up to 30 satellite plugs and pipes<br />
Initiation of regional exploration programme to target additional carbonatite <strong>in</strong>trusives with<strong>in</strong><br />
the exist<strong>in</strong>g Prospect<strong>in</strong>g Right (c.60,000 hectares)<br />
Metallurgy<br />
Complete bench-scale and pilot plant metallurgical studies<br />
Target scop<strong>in</strong>g study completion Q3/Q4 2011<br />
Pre-feasibility study Q4 2011/ Q1 2012<br />
Bankable feasibility study by end 2012<br />
2011-2013 budget for ZC1 development estimated at $8-10m p.a.<br />
24 │
Project Development Plans 2013+<br />
Conceptual development plan<br />
Possible production commencement Q4 2014/ Q1 2015<br />
Target production of up to 20,000 tonnes separated REO per annum<br />
M<strong>in</strong><strong>in</strong>g, flotation and potentially crack<strong>in</strong>g plant on site at ZC1<br />
Saldanha Bay has good <strong>in</strong>frastructure to site and support a <strong>rare</strong> <strong>earth</strong> separation plant<br />
Sichen to Saldanha<br />
iron ore rail l<strong>in</strong>e<br />
Saldanha Port<br />
Arcelor Mittal steel works<br />
Exxaro ilmenite smelter<br />
25 │
Rare Earth Metallurgy<br />
Metallurgy is key to development time and capital and operat<strong>in</strong>g costs for RE projects<br />
RE m<strong>in</strong>erals <strong>in</strong> many new projects have never had commercial processes developed<br />
for flotation or leach<strong>in</strong>g of the conta<strong>in</strong>ed <strong>rare</strong> <strong>earth</strong>s<br />
Zandkopsdrift is expected to pr<strong>in</strong>cipally conta<strong>in</strong> “conventional” RE m<strong>in</strong>erals for which<br />
commercial extraction processes exist<br />
Bulk of the <strong>rare</strong> <strong>earth</strong> content is <strong>in</strong> supergene monazite (similar to Lynas‟ Mount Weld<br />
<strong>deposit</strong>)<br />
Lesser amounts <strong>in</strong> crandallite and gorceixite<br />
M<strong>in</strong>eralogy and metallurgy reviewed by SGS M<strong>in</strong>erals Services (1) , who concluded:<br />
Considerable potential for upgrad<strong>in</strong>g by flotation of a majority of the available REE<br />
Very good levels of recovery (>90%) of <strong>rare</strong> elements to solution<br />
The REE element bear<strong>in</strong>g m<strong>in</strong>erals are likely amenable to conventional extractive<br />
processes<br />
Low thorium (average 225ppm) and uranium (average 65ppm)<br />
Reduces environmental permitt<strong>in</strong>g and related issues<br />
(1) SGS M<strong>in</strong>erals Services report, Appendix 5, NI 43-101 Resource Estimate and Technical Report (28 September 2010)<br />
26 │
LREO<br />
HREO<br />
Differ<strong>in</strong>g Rare Earth Distributions Makes Benchmark<strong>in</strong>g difficult<br />
The “Big 5” REOs are key and contribute >50% to RE project revenues for all peers (notably not Molycorp)<br />
Avg REO Current<br />
Lynas Molycorp Frontier Frontier<br />
Rare<br />
Element Arafura Frontier Frontier Avalon Quest<br />
price REO price<br />
Nolans<br />
Strange<br />
RE Oxide ($/kg)1 ($/kg)2 Mt Weld Mtn Pass ZC1-C ZC1-B Bare Lodge Bore ZC1-A ZC1 Nechalacho Lake<br />
Lanthanum $12 $91 2.03% 2.39% 1.17% 0.93% 1.08% 0.55% 0.67% 0.55% 0.21% 0.13%<br />
Cerium $10 $91 3.63% 3.44% 2.04% 1.61% 1.63% 1.33% 1.16% 0.96% 0.46% 0.27%<br />
Praseodymium $29 $136 0.40% 0.30% 0.21% 0.17% 0.14% 0.16% 0.12% 0.10% 0.06% 0.03%<br />
Neodymium $30 $147 1.39% 0.82% 0.73% 0.58% 0.41% 0.59% 0.41% 0.34% 0.23% 0.11%<br />
Samarium $8 $91 0.20% 0.06% 0.11% 0.08% 0.08% 0.07% 0.06% 0.05% 0.05% 0.03%<br />
Europium $494 $740 0.05% 0.01% 0.03% 0.02% 0.02% 0.01% 0.02% 0.01% 0.01% 0.00%<br />
Gadol<strong>in</strong>ium $13 $98 0.12% 0.01% 0.07% 0.05% 0.04% 0.03% 0.04% 0.03% 0.05% 0.03%<br />
Terbium $515 $740 0.01% 0.00% 0.01% 0.01% 0.01% 0.00% 0.00% 0.00% 0.01% 0.01%<br />
Dysprosium $148 $450 0.05% 0.00% 0.04% 0.03% 0.01% 0.01% 0.02% 0.02% 0.04% 0.04%<br />
Yttrium $18 $106 0.17% 0.00% 0.19% 0.15% 0.03% 0.04% 0.11% 0.09% 0.15% 0.28%<br />
Erbium $0 $0 0.02% 0.00% 0.01% 0.01% 0.00% 0.00% 0.01% 0.01% 0.02% 0.03%<br />
Thulium $0 $0 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.01%<br />
Ytterbium $0 $0 0.01% 0.00% 0.01% 0.01% 0.00% 0.00% 0.01% 0.00% 0.01% 0.03%<br />
Holmium $0 $0 0.01% 0.00% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.01% 0.01%<br />
Lutetium $0 $0 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%<br />
Total Grade 8.08% 7.04% 4.62% 3.65% 3.45% 2.79% 2.63% 2.16% 1.30% 1.00%<br />
Big 5 Grade 1.89% 1.13% 1.01% 0.80% 0.59% 0.78% 0.57% 0.47% 0.34% 0.19%<br />
B and C zones have good<br />
grades of the “Big 5”<br />
Notes:<br />
1. Based on average FOB Ch<strong>in</strong>a prices for 2008 through end 2010. No value is attributed to Holmium, Erbium, Thulium, Ytterbium and<br />
Lutetium as these elements have small markets, are typically produced to special order and do not have a regularly published price.<br />
Source: Roskill<br />
2. Prices from Metal Pages 1 March 2011<br />
27 │
Big 5 Comb<strong>in</strong>ed Absolute Grade %<br />
2.00%<br />
1.89%<br />
1.80%<br />
1.60%<br />
1.40%<br />
1.20%<br />
1.13%<br />
1.00%<br />
1.01%<br />
0.80%<br />
0.60%<br />
0.47%<br />
0.57% 0.59%<br />
0.69%<br />
0.78% 0.80%<br />
0.40%<br />
0.34%<br />
0.20%<br />
0.19%<br />
0.22%<br />
0.00%<br />
Note: Absolute grade calculated as set out on slide 30<br />
28 │
Equivalent Grade-The Best Metric for Compar<strong>in</strong>g Rare Earth Projects<br />
Comparisons of <strong>rare</strong> <strong>earth</strong> projects based on TREO and HREO can be mislead<strong>in</strong>g<br />
Some LREOs are low value, but some are high value, and have high demand growth<br />
(Neodymium and Praesodymium)<br />
Some HREOs are high value, but many are low value (Gadol<strong>in</strong>ium) or are produced <strong>in</strong><br />
small quantities to special order, so do not have a regular market price (Ho, Er, Th, Yb &<br />
Lu)<br />
Equivalent grade is a better metric<br />
Allows comparisons to be made between multi-commodity <strong>deposit</strong>s conta<strong>in</strong><strong>in</strong>g different<br />
distributions of m<strong>in</strong>erals with different values by convert<strong>in</strong>g <strong>in</strong>dividual m<strong>in</strong>eral grades <strong>in</strong>to a<br />
s<strong>in</strong>gle,dom<strong>in</strong>ant m<strong>in</strong>eral grade<br />
Provides for relative rank<strong>in</strong>g of projects<br />
„Metal equivalent‟ widely used and common <strong>in</strong> other multi-commodity <strong>deposit</strong> environments<br />
Neodymium (Nd) is proposed as an appropriate REO for which to calculate equivalent<br />
grade as, us<strong>in</strong>g three year average pric<strong>in</strong>g data, is the largest or second largest revenue<br />
contributor <strong>in</strong> the majority of Frontier‟s peer group<br />
Is a direct proxy for <strong>in</strong> situ revenue per tonne<br />
Approach endorsed by Ontario Securities Commission<br />
29 │
Project Comparison on Metal Equivalent Basis<br />
TREO Nd equivalent grade (%)<br />
6.00%<br />
5.00%<br />
4.00%<br />
3.00%<br />
2.00%<br />
1.00%<br />
0.70%<br />
0.81%<br />
1.05%<br />
1.41%<br />
1.58%<br />
1.71% 1.74%<br />
2.06%<br />
B and C zones have<br />
3 rd and 4 th highest<br />
Nd equivalent grades<br />
2.38%<br />
3.02%<br />
3.43%<br />
5.23%<br />
0.00%<br />
The follow<strong>in</strong>g assumptions have been made <strong>in</strong> calculat<strong>in</strong>g Nd equivalent grades:<br />
a) Calculated on an oxide-equivalent basis. Data is for Measured and Indicated Resource, except for Strange Lake and<br />
Bear Lodge, which conta<strong>in</strong> <strong>in</strong>ferred resources only<br />
b) Assumes 100% metallurgical recovery<br />
c) Based on the REO distributions and grades as set out <strong>in</strong> slide 27<br />
d) Based on average REO prices from 2008 through end 2010 as set out <strong>in</strong> slide 27<br />
e) Only projects with > 200 kt TREO calculated on code compliant basis <strong>in</strong>cluded<br />
f) Non-REO by products excluded<br />
30 │
Potential Capital Cost<br />
Cost Drivers<br />
Size of plant<br />
Geographic location<br />
Exist<strong>in</strong>g Infrastructure<br />
M<strong>in</strong><strong>in</strong>g method<br />
Ore type and process complexity<br />
Rare Earth Grade<br />
Zandkopsdrift‟s position<br />
The anticipated plant size at the Zandkopsdrift project is of globally significant scale (20ktpa TREO)<br />
<strong>South</strong> <strong>Africa</strong> is a m<strong>in</strong><strong>in</strong>g friendly, lower cost jurisdiction with a benign (arid) year-round climate<br />
The ZC1 <strong>deposit</strong> is located <strong>in</strong> SA‟s oldest m<strong>in</strong><strong>in</strong>g prov<strong>in</strong>ce, close to transport l<strong>in</strong>ks and other relevant <strong>in</strong>frastructure<br />
As the Zandkopsdrift <strong>deposit</strong> outcrops on surface it can be m<strong>in</strong>ed on an open pit basis with a low/zero strip ratio<br />
The pr<strong>in</strong>cipal Rare Earth host m<strong>in</strong>eral is monazite for which commercial extraction processes exist<br />
The <strong>deposit</strong> has several high/higher Rare Earth grade zones which are expected to reduce ore throughput and capex<br />
$ 2500 m<br />
Announced Rare Earth Project Capex costs (US$m)<br />
$ 2000 m<br />
$ 1500 m<br />
$ 1000 m<br />
Potential Zandkopsdrift capex range<br />
$ 500 m<br />
$ 0 m<br />
Quest 12kt** Lynas 11kt Lynas 22kt Molycorp 20kt Molycorp 40kt Arafura 20kt Avalon 10kt* Greenland 43.7kt<br />
* Includes costs of 10ktpa m<strong>in</strong>e & process<strong>in</strong>g plant and 25ktpa separat<strong>in</strong>g plant<br />
** Quest capex of $562m only br<strong>in</strong>gs product to a 99% mixed RE concentrate<br />
31 │
Comparative Valuation-Overview<br />
Company Lynas Molycorp Frontier<br />
Rare<br />
Element<br />
Arafura Avalon Quest Greenland<br />
Deposit Mt Weld Mtn Pass ZC1-C ZC1-B ZC1-A ZC1 Bear Lodge<br />
Nolans<br />
Bore<br />
Nechalacho<br />
Strange<br />
Lake<br />
Kvanefjeld<br />
Location Australia California S. <strong>Africa</strong> Wyom<strong>in</strong>g Australia<br />
NW<br />
Territories<br />
Quebec<br />
Greenland<br />
Revenue<br />
driver<br />
Nd equivalent<br />
grade 4 5.23% 3.43% 3.02% 2.38% 1.71% 1.41% 2.06%2 1.74% 1.13% 0.81% 2 0.7%<br />
Size of<br />
Resource (Mt)<br />
1.414 2.072 0.946 0.548 0.848 4.298 1.149 4.899<br />
Market<br />
3 $ 3,583 m $ 4,040 m $265m $ 389 m $ 442 m $ 649 m $ 320 m $ 317 m<br />
Capitalisation<br />
Project stage Construction Construction PFS 2011 PEA<br />
BFS <strong>in</strong><br />
progress<br />
PFS PEA PEA<br />
Deposit type Pipe Pipe Pipe Dykes Ve<strong>in</strong>s Tabular Ve<strong>in</strong>s Massive<br />
Pr<strong>in</strong>cipal<br />
Time and<br />
cost<br />
drivers<br />
M<strong>in</strong><strong>in</strong>g<br />
method<br />
Open Pit Open Pit Open Pit Open Pit Open Pit<br />
Underground<br />
Open Pit<br />
Climate Arid Arid Arid Cold Arid Arctic Cold Arctic<br />
Open Pit<br />
Infrastructure Poor Good Good Good Poor Poor Poor None<br />
1. Measured and Indicated shown where available; Inferred shown for projects<br />
with no M&I resources<br />
2. Based on Inferred resource grade<br />
3. Market Capitalisations as at 1 March 2011<br />
4. The follow<strong>in</strong>g assumptions have been made <strong>in</strong> calculat<strong>in</strong>g Nd equivalent grades:<br />
a) Calculated on an oxide-equivalent basis<br />
b) Assumes 100% metallurgical recovery<br />
c) Based on the REO distributions and grades <strong>in</strong> slide 27<br />
d) Based on average REO prices for 2008-2010 slide 27<br />
e) Non-REO by products excluded<br />
32 │
IPO Overview - November 2010<br />
►Successful IPO on the Toronto Stock Exchange (TSX:FRO) (TSX:FRO.WT)<br />
$62m (gross) raised <strong>in</strong> full treasury issue<br />
IPO structured as a Unit offer (one share and one half warrant)<br />
Offer significantly oversubscribed<br />
40+ <strong>in</strong>stitutional accounts participated<br />
IPO Offer Split<br />
Geographic Split<br />
Retail<br />
18%<br />
UK/<br />
Europe<br />
16%<br />
Institutional<br />
82%<br />
US<br />
29%<br />
Canada<br />
55%<br />
33 │
Zandkopsdrift Summary<br />
World-<strong>class</strong> <strong>deposit</strong><br />
Good potential for <strong>in</strong>crease <strong>in</strong> <strong>deposit</strong> size<br />
Excellent exploration potential both locally and regionally<br />
Straightforward to develop<br />
Low cost environment (capex and opex)<br />
Potential for rapid development and early production compared to many<br />
peers<br />
34 │
Appendices<br />
DRAFT
Rare Earths – Overview<br />
Series of 15 chemically similar elements that occur and are recovered together<br />
Distribution of elements varies from <strong>deposit</strong> to <strong>deposit</strong><br />
Two dist<strong>in</strong>ct categories based on atomic weight: Light Rare Earths and Heavy Rare Earths<br />
Each element has a range of dist<strong>in</strong>ctive physical properties which allow them to be<br />
used <strong>in</strong> a variety of technological applications<br />
Magnetic, optical, electrical, catalytic and metallurgical<br />
Underp<strong>in</strong> the “green economy”<br />
Hybrid motor and battery technology<br />
Energy efficiency<br />
W<strong>in</strong>d power<br />
Consumer electronics<br />
Defence<br />
Most have no substitutes and are <strong>in</strong>dispensable <strong>in</strong> many applications<br />
36 │
Rare Earths – Uses<br />
Biggest use is for magnets, phosphors and metal alloys<br />
Accounts for 82% of demand by value<br />
Value of RE usage by application(2008)<br />
40%<br />
37%<br />
35%<br />
30%<br />
31%<br />
25%<br />
20%<br />
15%<br />
14%<br />
10%<br />
5%<br />
5%<br />
4% 4%<br />
3%<br />
2%<br />
0%<br />
Magnets Phosphors Metal Alloys Catalysts Ceramics Polish<strong>in</strong>g Other Glass<br />
Source: Roskill<br />
37 │
Rare Earths – Historical Supply<br />
Ch<strong>in</strong>a has dom<strong>in</strong>ated <strong>world</strong> <strong>rare</strong> <strong>earth</strong>s supply s<strong>in</strong>ce mid 1990‟s; currently controls<br />
97% of supply<br />
No <strong>in</strong>crease s<strong>in</strong>ce 2005 despite steadily <strong>in</strong>creas<strong>in</strong>g demand<br />
Ch<strong>in</strong>a‟s supply dom<strong>in</strong>ance likely to cont<strong>in</strong>ue<br />
Global Supply (tonnes REO)<br />
140,000<br />
120,000<br />
100,000<br />
80,000<br />
60,000<br />
40,000<br />
20,000<br />
0<br />
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009<br />
Ch<strong>in</strong>a<br />
ROW<br />
Source: Roskill<br />
38 │
Rare Earths – Supply/Demand Forecasts<br />
Demand projected to grow at 10-15% CAGR from 2010 to 2015<br />
Ch<strong>in</strong>a‟s domestic demand cont<strong>in</strong>ues to <strong>in</strong>crease faster than its supply<br />
Supply deficit widely forecast<br />
55kt of REO required from non-Ch<strong>in</strong>a sources by 2015, up from 5kt <strong>in</strong> 2010<br />
Significant opportunity for new producers<br />
Global Supply and Demand (tonnes REO)<br />
225,000<br />
200,000<br />
175,000<br />
150,000<br />
125,000<br />
100,000<br />
75,000<br />
50,000<br />
25,000<br />
0<br />
2004 2005 2006 2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015f<br />
Ch<strong>in</strong>a supply ROW supply Ch<strong>in</strong>a demand ROW demand Total demand<br />
Source: Roskill<br />
39 │
Management<br />
Management team with extensive experience of exploration and development of m<strong>in</strong>eral<br />
projects <strong>in</strong> <strong>South</strong>ern <strong>Africa</strong>, f<strong>in</strong>anc<strong>in</strong>g and corporate development<br />
James Kenny B Comm, MBS<br />
Chief Executive<br />
20+ years experience <strong>in</strong> natural resources sector<br />
as an adviser, broker, executive and promoter.<br />
Centrally <strong>in</strong>volved <strong>in</strong> Frontier's corporate strategy<br />
and development activities to date.<br />
Paul McGu<strong>in</strong>ness B Comm, ACA<br />
Chief F<strong>in</strong>ancial Officer<br />
14 years experience <strong>in</strong> <strong>in</strong>vestment bank<strong>in</strong>g and<br />
f<strong>in</strong>ancial control: Arthur Anderson, Salomon<br />
Brothers, Schroders, Coll<strong>in</strong>s Stewart and MG<br />
Capital.<br />
Dr. Stuart Smith B Sc, PhD<br />
Vice President, Exploration<br />
30+ years experience <strong>in</strong> m<strong>in</strong>eral exploration with<br />
particular experience <strong>in</strong> <strong>rare</strong> <strong>earth</strong>s, uranium,<br />
base metals and diamonds.<br />
Philip Kenny B Eng, MBA<br />
Non–executive Chairman<br />
25 years experience <strong>in</strong> natural resource sector.<br />
CEO of Firestone Diamonds plc, an AIM-listed<br />
diamond m<strong>in</strong><strong>in</strong>g company focused on <strong>South</strong>ern<br />
<strong>Africa</strong>.<br />
40 │
Non-executive Directors<br />
Crisp<strong>in</strong> Sonn B.A., B.Comm<br />
(<strong>South</strong> <strong>Africa</strong>)<br />
Executive Director of Old Mutual <strong>South</strong> <strong>Africa</strong>, the<br />
largest <strong>in</strong>tegrated f<strong>in</strong>ancial services company <strong>in</strong><br />
<strong>South</strong> <strong>Africa</strong>. Chairman of the Old Mutual<br />
Foundation, found<strong>in</strong>g Chairman of Foodbank<br />
<strong>South</strong> <strong>Africa</strong> and Non-executive Director of<br />
Capespan (Pty) Ltd.<br />
Anu Dhir B.A., J.D.<br />
(Canada)<br />
Former VP Corporate Development and<br />
Company Secretary of Katanga M<strong>in</strong><strong>in</strong>g Limited.<br />
Manag<strong>in</strong>g Director of M<strong>in</strong>iqs Limited, Nonexecutive<br />
Director of Anooraq Resources<br />
Corporation and Non-executive Director of<br />
Compass Asset Management.<br />
Eamonn Grennan B.Sc, M.Sc<br />
(Ireland)<br />
Independent consult<strong>in</strong>g geologist with over 40<br />
years experience as an exploration manager,<br />
geologist, consultant and senior lecturer. Former<br />
President of the Irish Association for Economic<br />
Geology and member of the Consultative<br />
Committee of the Irish Geological Survey.<br />
41 │
ZC1 Historical Exploration<br />
42 │
ZC1 Historical Drill<strong>in</strong>g Summary<br />
43 │
ZC1-C Zone: Significant High Grade Intersections<br />
Drill Hole Intersection (m)<br />
Average Grade<br />
(% TREO)<br />
ZKR36 0-58 4.3<br />
ZKR08 26-33 5.8<br />
ZKR13V 19-42 5.4<br />
ZKR28V 3-17 3.6<br />
ZKR12 22-46 5.6<br />
ZKR15 46-56 4.5<br />
and 76-86 4.1<br />
ZKD38 0-19 4.4<br />
and 43-49 11.4<br />
<strong>in</strong>clud<strong>in</strong>g 44-45 18.9<br />
ZKR27V 52-55 4.8<br />
and 90-108 (1) 3.3<br />
ZKR33V 7-65 4.0<br />
ZKR07 15-35 4.1<br />
ZKR26 35-51 3.5<br />
ZKR16 35-49 3.2<br />
(1) Hole term<strong>in</strong>ated <strong>in</strong> m<strong>in</strong>eralization<br />
44 │
US$m - Capex<br />
Illustrative <strong>South</strong>ern <strong>Africa</strong> cost advantage vs. North America<br />
700<br />
60<br />
600<br />
Capex ($m) (lhs)<br />
Opex ($/t) (rhs)<br />
50<br />
500<br />
40<br />
400<br />
300<br />
200<br />
30<br />
20<br />
US$ per tonne - Opex<br />
100<br />
10<br />
0<br />
Gahcho 2.7mt Renard 1.3mt AK6 2.5mt<br />
NW Territories<br />
Quebec<br />
Botswana<br />
0<br />
1. Chart shows capex and opex for similar sized kimberlite diamond m<strong>in</strong>es be<strong>in</strong>g developed <strong>in</strong><br />
Canada and <strong>South</strong>ern <strong>Africa</strong><br />
2. Gahcho Kue (Mounta<strong>in</strong> Prov<strong>in</strong>ce/ De Beers), Renard (Stornoway), AK6 (Lucara)<br />
45 │
LREO<br />
HREO<br />
REO Prices and Relative Distribution<br />
Average Current<br />
Frontier Lynas Molycorp<br />
price 1 price 2<br />
RE Oxide ($/kg REO) ($/kg REO) ZC1 Mt Weld 4 Mtn Pass<br />
Rare<br />
Element Arafura Avalon Quest<br />
Bear<br />
Lodge<br />
Nolans<br />
Bore<br />
Nechalacho<br />
Strange<br />
Lake<br />
Lanthanum $12 $91 25.42% 25.14% 34.00% 31.27% 19.78% 15.83% 13.19%<br />
Cerium $10 $91 44.17% 44.97% 48.80% 47.19% 47.63% 35.72% 27.37%<br />
Praseodymium $29 $136 4.55% 4.90% 4.20% 4.05% 5.83% 4.51% 3.00%<br />
Neodymium $30 $147 15.77% 17.18% 11.70% 11.87% 21.24% 17.83% 10.69%<br />
Samarium $8 $91 2.31% 2.44% 0.79% 2.35% 2.37% 3.91% 2.60%<br />
Europium $494 $740 0.59% 0.56% 0.13% 0.55% 0.40% 0.49% 0.20%<br />
Gadol<strong>in</strong>ium $13 $98 1.44% 1.54% 0.21% 1.22% 1.00% 3.71% 2.70%<br />
Terbium $515 $740 0.17% 0.17% 0.02% 0.17% 0.08% 0.54% 0.60%<br />
Dysprosium $148 $450 0.77% 0.58% 0.05% 0.41% 0.33% 2.71% 4.10%<br />
Holmium $0 $0 0.13% 0.08% 0.02% 0.03% 0.00% 0.48% 0.90%<br />
Erbium $0 $0 0.32% 0.22% 0.02% 0.06% 0.00% 1.26% 2.80%<br />
Thulium $0 $0 0.04% 0.02% 0.02% 0.00% 0.00% 0.17% 0.50%<br />
Ytterbium $0 $0 0.23% 0.09% 0.02% 0.03% 0.00% 1.01% 2.90%<br />
Lutetium $0 $0 0.03% 0.02% 0.02% 0.00% 0.00% 0.14% 0.40%<br />
Yttrium $18 $106 4.07% 2.08% 0.02% 0.81% 1.32% 11.69% 28.07%<br />
Total 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%<br />
Notes:<br />
1. Based on average FOB Ch<strong>in</strong>a prices for 2008-2010. Source: Roskill<br />
2. Based on current FOB Ch<strong>in</strong>a prices. Source: Metal Pages, 1 March 2011<br />
3. No value is attributed to Holmium, Erbium, Thulium, Ytterbium and Lutetium as they have small markets and are typically produced to<br />
special order and do not have regularly published prices.<br />
4. Mount Weld distribution calculated as a weighted average of the Central and Duncan <strong>deposit</strong>s<br />
46 │